Mark Landsbaum: Debt, the hidden destroyer

None other than John Marshall, chief justice of the United States for 34 years, concluded that the power to tax is the power to destroy. And none other than California's former Gov. Arnold Schwarzenegger proclaimed, "We don't have a revenue problem. We have a spending problem."

The news emanating daily from Washington and Sacramento attests that runaway taxing and spending have gotten us into a fine mess. Both men were correct, although Schwarzenegger later betrayed his insight and raised taxes like no governor before him in order to spend like no governor before him. It's one thing to recognize the problem. Clearly, it's quite another thing to do something to correct it.

Arguably, one wiser than Marshall or Schwarzenegger millennia ago identified an even greater trouble than taxing and spending: "The wicked borrows and does not pay back," wrote the psalmist.

Debt is the most insidious of civic plagues, far more so than even excessive taxing and extreme spending. That's because debt is less obvious and more abstract. Spend a dollar, and you know it's gone. Tax a dollar, and you're aware it's taken. Go in debt for a dollar, and it's out of sight, out of mind.

Too many learn this lesson the hard way after being buried in mountains of debt far beyond their ability to repay. Likewise, it's been easier for government to borrow itself into a monumental financial hole than to tax or spend itself into one. In the past week, we have been reminded of the gravity of the situation.

Schwarzenegger's successor, Gov. Jerry Brown, has proposed a new budget that "does nothing" to address mounting costs for teacher pensions and retiree health care, the Los Angeles Times reported. "There's no plan as to how we pay those off," said Mac Taylor, California's independent legislative analyst.

How serious is that problem? "Sacramento is legally obligated to pay many billions of dollars withheld from schools, local governments and health care providers as lawmakers struggled repeatedly to balance the books," the Times reported in a separate story. "It owes Wall Street more per resident than almost every other state. And it has accumulated a crushing load of debt for retiree pensions and health care, now totaling more than taxpayers spend each year on all state programs combined."

What's the solution? Increasing debt is devastating; therefore, to solve the problem, debt must be reduced.

Government should not engage in new spending until debt is reduced, preferably to zero. Any tax increases should be used 100 percent to pay off debt, not to increase spending on programs, salaries or benefits. Any savings from spending cuts should be used to retire debt, even before refunding the money to taxpayers. It is in taxpayers' interest to lower public debt, which should then translate into lower taxes and more economical government.

Burgeoning government debt already dwarfs taxing and spending. California's budget is in the $90 billion range. But the state owes hundreds of billions. The federal budget is in the $3 trillion range. But Washington owes $16 trillion.

Furthermore, the worse the debt problem gets, the more impetus it adds to taxing and spending problems. Taxes raised for state and federal budgets increasingly are being diverted to service debt obligations, which often amount to merely paying off interest charges, not retiring existing principle.

In California, interest payments on state-issued bonds totaled 7.9 percent of general fund spending in 2011-12, and jumped to 8.9 percent for 2012-13, the state treasurer estimated. At the federal level, 43 cents of every dollar spent is borrowed, about four times the rate in 1980. We can be grateful Sacramento at least is legally required to make the state budget appear to balance revenue and spending. But the federal government's annual budget for four years, and most likely for four more, will run up annual trillion-dollar-plus deficits.

Arguably, paying down debt should trump any other use of tax dollars, with the exception of absolutely necessary services. But after decades of larding on benefits, entitlements, supplementary provisions and absurdities such as taxpayer-financed "green" jobs and cellphones, it is difficult for politicians to take back any of the gratuities they've heaped on a grateful public.

Obama uttered those admirable words in 2006 when he was a senator from Illinois. Now that he's president, he has changed his tune. In fact, he insists the debt ceiling must be raised again. We must borrow more, he says.

This is akin to using one credit card to pay off another, while running up more interest debts on the second one. If there's a surprise in all of this, it's that Congress has agreed to any ceiling on debt.

The president, not so long ago a staunch deficit hawk, now believes "deficit reduction is not a worthy goal unto itself," according to his spokesman. We're uncertain where that means the buck stops, but it doesn't look like it's at the White House.

The president says he is willing to pay down debt, but he wants Congress to agree to increase taxes one dollar for every dollar debt is reduced. This is a concept foreign to the private sector. Fewer customers tend to buy a product when its prices go up to cover a business's debt. And few employers increase wages simply because employees piled on more debt. Yet in Washington, somehow this approach is supposed to make sense.

We suspect Obama knew it was wrong to increase debt in 2006 and still does today. But Washington holds no monopoly on duplicity. In Sacramento, Gov. Brown's 2012-13 budget assumed $5.2 billion in budgetary debt would be paid off in 2013-14. But the governor reduced that assumption by about $1 billion, and deferred repayment, Republicans say.

The bottom line is that, in government, every dollar of additional debt exerts more pressure to raise taxes. Every additional dollar raised in taxes increases the temptation to divert that money to more spending, rather than paying off debts. But like the family that uses credit cards to pay off credit cards, the buck stops eventually.